Falling house prices trigger negative equity debt problems

We have been contacted by two people today who are slipping badly into debt as the equity in their houses diminishes because of the fall in value of their homes.

Their stories have been quite harrowing and serve as a warning of worse debt problems to come.

One person had taken out a £40,000 secured loan with a major lender last year. In those days of cheap credit, this loan took his total borrowings to 125% of the value of his property.

That was fine whilst his house was increasing in value, but things are looking grim for him now that house prices are falling so much.

He needs to sell his house and move into rented accommodation. There is one major problem though. Once his mortgage is paid off, there will only be enough equity to pay off £10,000 of his £40,000 secured loan.

He will still owe the secured loan lender £30,000. It is likely that he will also have to pay them additional early redemption fees.

In a desperate situation, he contacted us to see if there was anything that we could do to help.

It struck me that this person needs debt management professional help fast. He needs excellent advice to prevent further debt problems and to help him resolve this dire situation.

Although there are commercial debt management companies available, we recommended that he contact one of the debt management charities that exist to help people in these bad situations.

About The Author

Chris

I have been writing articles about personal finance since we started MoneyHighStreet.com in 2006. In that time, I have been fortunate to have had a regular broadcasting spot on BBC Radio Essex and have also appeared on BBC Rip Off Britain and ITN.
With a family comprising two teenagers, a wife and a bouncy black labrador, getting the finances right is clearly important. It's a privilege to share our tips and experiences to help you manage your money just that bit better.